Multiple Choice
Identify the choice
that best completes the statement or answers the question.
|
|
|
1.
|
Which of the following is true about using
credit:
a. | It’s the same as using cash. | c. | When using credit, one spends more. | b. | When using credit, one spends less. | d. | Using credit
neurologically registers as pain. |
|
|
|
2.
|
What is the best way to buy a car?
a. | Leasing | c. | 0%
financing on new or used | b. | Purchase new at
the end of the year | d. | Purchase used (two years or
older) |
|
|
|
3.
|
How much more do you spend on purchases when you
used credit vs. cash?
a. | 3-5% | c. | 10-20% | b. | 12-18% | d. | no difference in
spending |
|
|
|
4.
|
If 80% of millionaires are first generation rich,
than one can conclude:
a. | They started with nothing, made smart decisions, and
became millionaires | d. | Both a and
b | b. | They fell for the myths that society lives
by | e. | All of the above | c. | The other 20% are
not millionaires |
|
|
|
5.
|
On average, payday lending, cash advance and title
pawning loans cost the consumer:
a. | 400% or more annually | c. | Three times the APR of an average credit card | b. | Nothing but the fee if you pay back the loan within 30
days | d. | 100-250% annually |
|
|
|
6.
|
What is the problem with using credit cards if you
pay your balance off each month?
a. | This is the only responsible used of
credit. | c. | You are more apt to buy on impulse rather than thinking
about a purchase | b. | You are spending
an average of 12-18% more when you use a credit card. | d. | Both b and
c |
|
|
|
7.
|
Which statement is not true about debt
consolidation?
a. | You only have one payment to deal
with. | c. | Smaller payments equals more time in
debt. | b. | You end up saving money because you are getting a lower
interest rate. | d. | Your lower interest loans also get rolled into the deal so you end up with
minimal savings. |
|
|
|
8.
|
Which is true about the marketing of credit cards
to teenagers?
a. | Teens are the number one target of credit card companies
across America. | c. | Colleges are losing more students to
credit card debt problems than to academic failure. | b. | Brand loyalty to your first card is incredible, so credit card companies work
hard to become the first issuer. | d. | All of the above |
|
|
|
9.
|
Which type of mortgage is the best to take out,
particularly if you are going to be moving in five to seven years?
a. | Fixed 30-year | c. | Fixed
15-year | b. | Adjustable Rate Mortgage | d. | Balloon
Mortgage |
|
|
|
10.
|
Which of the following is a step out of
debt?
a. | Quit borrowing money | c. | Using the debt snowball | b. | Sell
something | d. | All of the above |
|
|
|
11.
|
The key to building wealth is:
a. | Staying debt free | c. | Fixed
rate, 15 year mortgages | b. | A good education
and income | d. | Driving reliable used cars |
|
|
|
12.
|
Which is not part of the debt
snowball?
a. | Pay minimum on all debts except the smallest
one. | c. | List you debt from highest interest rate to lowest
interest rate. | b. | Put every extra
dollar you can on the smallest debt | d. | The minimum payment from a paid off debt goes toward the
new payment amount of the next debt. |
|
|
|
13.
|
Which is true about making purchases with credit
cards?
a. | You spend 12-18% less when using a credit
card. | c. | You are more likely to experience the “pain”
when purchasing with a credit card. | b. | You spend 12-18%
more when using a credit card. | d. | None of the above |
|
|
|
14.
|
Which statement is not true about
depreciation?
a. | Depreciation and interest accounts for more than half
the annual costs of owning a car. | c. | A new
car loses 40% of its value in the first four years. | b. | Depreciation doesn’t matter if you pay for something using
cash. | d. | When buying slightly used items, you minimize
depreciation. |
|
|
|
15.
|
Why do people think that home equity loans are
good?
a. | Because of the tax refund | c. | It’s a good way to consolidate debt | b. | They serve as a substitute for an emergency fund | d. | All of the
above |
|
|
|
16.
|
Kevin has the following debts: home equity
loan, $24,000; Visa, $1,200; student loan, $5000; car, $12,000. How should he prioritize his
debt snowball?
a. | Home equity, Visa, student loan,
car | c. | Visa, student loan, car, home
equity | b. | Visa, car, student loan, home
equity | d. | Need the interest rate of each loan to do the debt snowball
accurately |
|
|
|
17.
|
What is NOT true in regards to making minimum
payments on a credit card?
a. | Minimum payments leave you in debt
longer | c. | As long as you can make minimum payments, the balance
you owe doesn’t matter. | b. | A minimum payment
is usually a much smaller % of the balance than the average interest rate. | d. | Minimum payments
are designed to keep you in debt, therefore making credit card companies more
money. |
|
|
|
18.
|
The main difference between debit and credit cards
is:
a. | A debit card requires that you have the cash available
in the account; a credit card doesn’t | c. | A
debit card does not offer the same protections as a credit card. | b. | A credit card has the Visa or MasterCard logo; a debit card
doesn’t | d. | A credit card requires that you have the cash available in the account; a
debit card doesn’t |
|
|
|
19.
|
What concept likely had an impact on
McDonald’s when they began accepting credit cards?
a. | People spend 12-18% more using plastic, so the average
price of an order increased. | c. | There was no change in the average
price of an order. | b. | People found it
more convenient to pay with a credit card, so the average price of an order
increased. | d. | Both a and b |
|
|
|
20.
|
Baby Step 2 is:
a. | A fully funded emergency fund. | c. | Pay off all debt using the debt snowball. | b. | Save 15% of income for retirement. | d. | Take a 15-year vs.
30-year mortgage |
|
|
|
21.
|
Which is true about the myth, “I will take
out a 30-year mortgage and pay it off early”?
a. | The monthly payment on a 15-year mortgage is
significantly more than a 30-year mortgage. | c. | People
generally will pay it off early if they set that as a goal. | b. | Other important things come up and it usually does not get paid off
early. | d. | All of the above |
|
|
|
22.
|
Why should you avoid lending money?
a. | The relationship changes | d. | All of the above | b. | Often the
relationship ends completely | e. | Both a and b | c. | The person borrowing the money is in bondage to
you |
|
|
|
23.
|
Which is a danger of co-signing a
loan?
a. | The bank wouldn’t give that person a loan without
your help. | c. | If the person doesn’t pay, you are responsible for
the debt. | b. | If the person doesn’t pay, you become responsible
for the debt. | d. | You know them and trust them so co-signing is not
dangerous. |
|
|
|
24.
|
Which of the following is not a
myth?
a. | 78% of Americans do not pay off their credit card
balance every month. | c. | Debt properly used is a tool to build
wealth. | b. | Teenagers will learn to handle money responsibly if
given a credit card. | d. | Playing the lotto will make you
rich. |
|
Matching
|
|
|
a. | Debt | i. | Leasing | b. | ARM | j. | Consolidation | c. | Baby Step 2 | k. | Loan term | d. | Annual fee | l. | Introductory rate | e. | Home Equity Loan | m. | Finance
charge | f. | Depreciation | n. | Annual percentage
rate | g. | Myth | o. | Credit
limit | h. | Lottery |
|
|
|
25.
|
A widely held, but mistaken belief.
|
|
|
26.
|
Mortgage loans where the interest rate is adjusted
periodically.
|
|
|
27.
|
Fee charged by a credit card company for the use
of their credit card.
|
|
|
28.
|
A tax on the poor and people who can’t do
math
|
|
|
29.
|
The debt snowball
|
|
|
30.
|
Most expensive way to finance a new
car
|
|
|
31.
|
Using equity in a home as collateral when
borrowing money
|
|
|
32.
|
Combining separate debt payments into one single
payment
|
|
|
33.
|
A product agressively marketed to
consumers
|
|
|
34.
|
A drop in the value of property
|
|
|
35.
|
The maximum amount of credit that a bank or other
will extend to a customer
|
|
|
36.
|
The cost of using credit, including interest, late
charges and other fees
|
|
|
37.
|
The time, usually expressed in years, that a
lender sets in which a buyer must pay a mortgage.
|
|
|
38.
|
The cost of borrowing money on an annual basis;
takes into account the interest rate and other related fees on a loan.
|
|
|
39.
|
A very low, but very temporary
“teaser” rate on an adjustable rate mortgage or credit card
|
Short Answer
Use what you have learned
to answer the following questions.
|
|
|
40.
|
List three myths and explain why they are
not true.
1.
__________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
2.
__________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
3.
___________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
|
|
|
41.
|
Why are teens a major target of credit card
companies?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
|
|
|
42.
|
What are two problems with buying a new
car?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
|